How to Handle Confidentiality Clauses in Settlement Agreements
As a person who has been hurt in a preventable accident, it’s important to be aware of the fact that most personal injury cases are settled out of court. In many cases, the at-fault party requests that a “confidentiality clause” is included in the settlement, leading many accident victims to wonder about what they mean and why they are included.
At their most basic, confidentiality clauses seek to prevent victims from disclosing the terms of the settlement. If the confidentiality clause is violated, victims are often required to return the entire amount of the settlement or a predetermined amount that is less than the amount of the initial settlement.
Protecting Your Rights
As the consequences of violating a confidentiality clause can be extremely serious, it’s vital that you do everything that you can to protect your rights. First, you should be sure to retain an attorney that is familiar with representing clients in settlement negotiations that involved confidentiality agreements in the past. Typically, if the insurance company on the other side is seeking a confidentiality clause, your attorney will seek additional monetary consideration in return for the inclusion of such a clause.
Also, since monetary consideration for a confidentiality clause is taxable, whereas money paid on account of a bodily injury is not taxable, the settlement agreement should explicitly set forth what portion of the settlement is for the confidentiality clause and what portion is for the bodily injury clause.
The confidentiality clause should also provide an exemption that allows you to discuss the terms of the settlement with your attorneys, accountants, financial advisors, family members, and anyone else who has a legitimate reason to know.
In addition, your lawyer should do everything possible to limit the amount of damages that the other party can obtain in the event that you violate the confidentiality clause. Ideally, the damages for violating the clause should not be significantly more than the additional compensation you received in return for the inclusion of the confidentiality clause.
Finally, your attorney should be sure to negotiate a provision that explicitly states what you are allowed to tell third-parties about your settlement when you are asked. This will allow you to let people know that your case has been resolved without worrying that you will violate the terms of your agreement.
Never Enter into a Settlement Agreement without the Representation of an Attorney
As an accident victim, it’s vital that you understand that the insurance company on the other side of the negotiating table does not have your best interests in mind. In fact, they will do everything they can to minimize the amount of compensation you receive and include terms into your settlement agreement that are favorable to their interests. For this reason, accident victims should always have an attorney represent them, regardless of whether their case seems like it will settle or go to court.
Call Us Today to Schedule a Free Case Evaluation with a Tustin Personal Injury Attorney
If you have recently been hurt in an accident or are actively involved in settlement negotiations with an insurance company, it’s in your best interest to retain an experienced lawyer as soon as you can. Request a free consultation with attorney Gary A. Peterson, call our office today at 714-461-6003 or contact us online.